New analysis of inequality in Australia pre-COVID-19 provides a baseline against which to measure the impacts of the pandemic on income and wealth inequality. It highlights the ameliorating effects of timely Government policy responses – including increased Jobseeker and Jobkeeper payments – but warns that the long-term effect of the pandemic on income and wealth inequality will depend on how these policies evolve.
Using the latest available ABS data (2017-18), the ACOSS/UNSW Sydney Poverty and Inequality Partnership Report finds that, pre-COVID, the incomes of those in the highest 20% were 6 times higher than those in the lowest 20%, with that gap widening since 2015-16 (when the ratio was 1:5).
An examination of wealth data shows that, for the first time, average household wealth exceeded $1 million in 2017-18. However, the distribution of wealth in Australia was deeply unequal, with the average wealth of the top 20% ($3,255,000) some 90 times that of the lowest 20% ($36,000). Those in the lowest 10% held $8000 in average net wealth, and the bottom 5% held net debts of $5000.
The report also examines available data on the impacts of COVID-19 on employment and incomes to explore the likely impacts of the pandemic and associated lockdowns on inequality in Australia. It confirms that the pandemic has had a stark impact on those in lower paid jobs, with the average wage of people in the most affected industries half that of people in least affected industries even before the pandemic. The majority of those affected by deep income losses are women and young people.
The data shows that:
- Given the very low wealth holdings of those in the lowest 20%, it would be dangerous to require people spending down on these meagre savings to get them through this crisis. This would place millions of people in extreme financial vulnerability, with little or nothing behind them to weather future shocks.
- COVID-19 will likely further exacerbate income inequality due to the spike in unemployment, with the biggest job losses occurring in lower paid industries. Unless economic recovery strategies focus on job replacements in these areas, including women and young people, and provide an adequate income floor through social security, income inequality is likely to become more severe.
- Wealth inequality has grown strongly over the last 15 years, with people in the highest 20% experiencing extraordinary average growth in wealth of 68%. This is in stark contrast to those in the lowest 20% whose net wealth grew by just 6%, while those in the middle experienced wealth growth of 36%.